Saturday, September 09, 2006

The Economist on Joe and Globalization

Mr Stiglitz still believes that the stewards of the world economy are intellectual slaves to an 18th-century metaphor (“the invisible hand”) and some mid-20th-century mathematics, which formalised Adam Smith's claim that competitive markets square private interests with the public good. Mr Stiglitz won the Nobel prize in 2001 for showing why that claim does not always hold. Economists applaud his work: they think it enriches their theory of markets. Mr Stiglitz, who has never knowingly undersold his wares, thinks it largely invalidates it....

But if the writing is crisp, the arguments are a little soggy. Mr Stiglitz assumes the worst of markets, the best of governments—except, of course, his own. Too often, he wants to have it both ways: his distaste for the IMF has made him suspicious of all technocratic bodies, even to the point where he questions the case for independent central banks. But at the same time he wants to set up international tribunals to rule on unfair tax competition, for example, or health standards. He says that debt relief for the poorest countries is “simply a matter of accounting”, because they could not repay anyway. But he also wants to argue that the burden of red ink has crippled them....

“Making Globalisation Work” is not a bad book but it arrives after books that are better. Jagdish Bhagwati's arguments are more convincing (“In Defence of Globalisation”), Paul Blustein's reporting is more reliable (“And the Money Kept Rolling In and Out”) and Martin Wolf provides a better guide to the economic research (“Why Globalisation Works”). That Mr Stiglitz, a great and original theorist, should spend his time writing a “me-too” globalisation book rather proves his point that markets sometimes misallocate resources.

About Me

I am a professor and chairman of the economics department at Harvard University, where I teach introductory economics (ec 10). I use this blog to keep in touch with my current and former students. Teachers and students at other schools, as well as others interested in economic issues, are welcome to use this resource.